Retail Stocks Sink Over 1% Prior to Major Sales Event

The Market Vectors Retail ETF (RTH) dropped just over 1% on Monday, June 25th, 2012.  This drop pushed the RTH well below its 50 day moving average.  Most major retailers are preparing for July 4th sales as the holiday is just over a week away.  Retail holidays often take place during a three day weekend but 2012 will be a little bit different as July 4th falls on a Wednesday.  It will likely be the case that retailers offer lower prices during the weekend prior and the weekend after July 4th.

Major Retail Names Dip Below 50 Day Moving Averages

The 50 day moving average is often looked at as a short term market indicator.  If a stock is expected to move higher in the near term it is sitting above its 50 day moving average.  This means that the 50 DMA is also moving higher.  Any time the 50 DMA is moving higher investors are excited to see support increasing.  This will allow short term investors to place stop loss points below this popular support level so they can save money.

Photo by time_anchor via Flickr

It is important for all investors to recognize stock prices often move quickly.  Some of the more popular retail names Autozone, Tractor Supply Company and Ulta are still moving below their 50 day moving averages.  All three of these names led retail stocks higher in the first few months of the year but this has simply not been the case since May 1st.  On the first trading day of May 2012 stocks started to move lower and many of them have not recovered to a level above their 50 day moving average.

S&P 500 Dips 1.6% Even Though New Home Sales Increased

New Home Sales increased to a two year high but this did not propel the overall stock market higher.  The S&P 500 ended the day down 1.6% even though home sales were positive.  This is something that is very confusing to many but investors must understand that the market predicts future economic growth, not past performance.  New Home Sales report the number of homes sold last month.  Investors want to see a positive outlook for the number of home that will be sold in the coming months.

Rather than trying to predict home sales or the overall direction of the market many hard working Americans have created an investment plan to simply invest the same amount each and every month.  This is very apparent with the popularity of a 401(k).  Individuals simply take a percentage of their paycheck and sink it into a mutual fund or stock portfolio.  This takes all the guess work out of picking stocks on a specific date.